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Former Nasdaq executive pleads guilty to insider trading

May 26, 2011 |  2:26 pm

A former Nasdaq executive pleaded guilty Thursday to trading stocks based on inside information he gained while working for the stock exchange.  

Donald Johnson admitted in a Virginia federal court that he made trades on eight occasions between 2006 and 2009 using information he received as part of his work for Nasdaq's Market Intelligence Unit in New York.

Nasdaqfront "This case is the insider-trading version of the fox guarding the henhouse,” Robert Khuzami, director of enforcement at the Securities and Exchange Commission, said in a statement.

The SEC announced it was filing a civil suit against Johnson at the same time that Johnson pleaded guilty to one count of securities fraud. The SEC pegged Johnson's gains from his illegal trades at $755,000.

Johnson retired from Nasdaq in 2009 and now lives in suburban Virginia. While he was with the company he worked as a managing director on a team that took confidential information from companies listed on Nasdaq in order to provide the companies with analysis.

Among the stocks he traded were Central Garden and Pet Co., Digene Corp. and United Therapeutics Corp.

In 2007, he learned from executives at United Therapeutics that the company had succesfully completed trials on a new blood pressure medication, Tyvaso. Johnson bought 10,000 shares in the company and then sold them after the trial results were publicly announced, earning $175,000 according to the Department of Justice.

The SEC's complaint says Johnson placed the trades at work, but used a brokerage account in his wife's name to try to hide them. His wife was named as a defendant in the SEC's suit.

Johnson, 56, could face a prison sentence of up to 20 years. He is scheduled to be sentenced Aug. 12.

-- Nathaniel Popper

[Updated at 3:05 p.m.: An earlier version of this post incorrectly referred to the blood pressure medication as Tyvasco.]

Photo: The Nasdaq building on Times Square. Credit: Daniel Barry / Getty Images

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